PUBLIC PURCHASING IN FLORIDA COST CONTROL IN PUBLIC PURCHASING (REV. 09/06/05)
COST CONTROL: MISSION o o SPECIFIC MISSIONS OF GOVERNMENT PROCUREMENT VARY WITH ADMINISTRATIONS, CIRCUMSTANCES, AND NEAR-TERM OBJECTIVES STATE PURCHASING’S MISSION NOW IS “To deliver innovative, resource -saving purchasing services in order to provide effective program support to all state agencies. ”
COST CONTROL: MISSION o The underlying mission of governmental purchasing is AT ALL TIMES to provide the jurisdiction customers what they need, when and where they need it, at the lowest overall cost, considering both prices and program administration.
COST CONTROL MECHANISMS o HOW IS COST CONTROLLED?
COST CONTROL IS THE ANSWER “COMPETITION? ” WHAT IS THE RELATIONSHIP BETWEEN “LOW BID” & “LOWEST OVERALL COST? ” WHAT AFFECTS THE COSTS?
COST CONTROL Cost control is impacted by I. III. IV. Each step in the Purchasing Cycle Purchasing Instruments Purchasing Methods Purchasing Organization
I. IMPACT OF STEPS IN THE CYCLE 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
HOW DOES EACH WORK TO CONTROL COSTS? 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
1. BUY/DON’T BUY WHAT FACTORS INFLUENCE THIS DECISION?
BUY/DON’T BUY o o o o NEEDS/WANTS RESOURCE AVAILABILITY, IN & OUT COST QUALITY SCHEDULE RISK FLEXIBILITY POLITICS
2. SPECIFICATIONS DO COST CONSIDERATIONS AFFECT SPECS?
2. SPECIFICATIONS DO SPECS AFFECT COST?
3. SOURCING STRATEGY o o o o SPEND ANALYSIS INTERNAL PROFILE EXTERNAL PROFILE ITEMS OF BID PROCUREMENT METHOD TERM AWARD FORMULA
3. SOURCING STRATEGY o o o How do different procurement methods affect price and cost? How do contract terms affect price and cost? How do award criteria and formulas affect price and cost?
4. TERMS & CONDITIONS o o o GENERAL & SPECIAL CONDITIONS MUTUAL OBLIGATIONS RISK (WHAT’S THIS GOT TO DO WITH PURCHASING? )
5. PRICE COMPETITION NOW WE KNOW WHAT WE’RE TALKING ABOUT!
5. PRICE COMPETITION o o o How does competition lower prices and costs? How much? How does it compare to the other factors (buy/don’t buy, specs, strategy, terms & conditions, administration)?
6. ADMINISTRATION What elements are involved here, and how does each affect cost?
6. ADMINISTRATION o o o CONTRACT MANAGEMENT DISPUTE RESOLUTION (Is there one right answer? ) RENEGOTIATION LESSONS LEARNED PLANNING FOR THE FUTURE
COST CONTROL II. EFFECT OF PURCHASING INSTRUMENTS ON COST CONTROL
PURCHASING INSTRUMENTS Refer back to slide 6 and consider: o Purchasing cards o Purchase orders o Contracts
Purchasing cards 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
Purchase orders 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
Contracts 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
COST CONTROL III. PURCHASING METHODS
EFFECT OF PURCHASING METHODS ON COST CONTROL Refer back to slide 6 and consider: o o o SMALL DISCRETIONARY PURCHASE INFORMAL BID FORMAL ITB, RFP AND NEGOTIATIONS SINGLE SOURCE EMERGENCY PURCHASE
SMALL DISCRETIONARY PURCHASE 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
INFORMAL BID 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
FORMAL ITB, RFP AND NEGOTIATIONS 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
SINGLE SOURCE 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
EMERGENCY PURCHASE 1. 2. 3. 4. 5. 6. BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION
COST CONTROL IV. Purchasing Organization
PURCHASING ORGANIZATION CENTRALIZATION/DECENTRALIZATION AND COST CONTROL
CENTRALIZATION/DECENTRALIZATION AND COST CONTROL Refer back to slide 6 and consider: o o P Cards Purchase Orders/Contracts Local Purchase Orders Cost of qualified staff
TWO WAYS OF MEASURING YOUR PERFORMANCE o o o DO YOUR CUSTOMERS GET WHAT THEY NEED WHEN & WHERE THEY NEED IT? DO THEY GET IT AT THE LOWEST OVERALL COST? WHAT’S THE RELATIONSHIP, WHO CARES, AND WHY?
THE CONCEPT OF BEST VALUE V=Q/P
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